A Flurry of Sober Stock Rallies

When you look at the full mosaic of this action, you find it makes a lot of sense.

Earlier I wrote about why stocks are going up. Today represents at textbook why this is so. The action all seems one-off, and then you see the full mosaic, and it becomes thematic of the bull itself.

First there's Sysco (SYY) and WhiteWave Foods (WWAV). These two companies are emblematic of something that's a huge undercurrent of this moment: They each buy up competitors in order to raise margins and gain market share.

WhiteWave, for example, struck a deal to buy EarthboundFarm for $600 million -- and the acquisition will be immediately accretive, which means analysts will instantly raise its numbers. This line extension from plant-based milks to salads and vegetables makes WhiteWave much more valuable to shareholders. It positions the company with the ability to become a little more like Hain Celestial (HAIN), a spectacular performer. It also reminds us of how companies that build up heft in their industries have more bargaining power with suppliers and vendors.

Sysco, the food kind, is showing us the power of deals to move the needle in spectacular fashion. This stock has been stuck in the low $30s for ages. Suddenly it bursts out after inking a deal to buy a closely held competitor, U.S. Foods, for $3.5 billion, including $3 billion in stocks. The stock is zooming higher. Remarkable. At another time, I would fear anti-trust regulation. But not with this antitrust department -- the one that blessed the pact to merge American Airlines (AAL) and U.S. Airways, a deal that starts trading today. Speaking of that deal, I think that -­- after some initial disposal of stock by debt holders and workers who typically don't know what to do with their stock winnings other than sell them -- American will soar higher, too.

Mergers are also behind the strength of Micron (MU), the semiconductor company that continues to perform incredibly well, in part because it bought Elpida, a failing Japanese conglomerate, which competed in the market for dynamic random access memory (DRAM). That has allowed Micron's DRAM business to maintain price. A lack of capacity for its second line of business, flash, has kept pricing strong for that commodity, too. Of course, it wouldn't matter if demand weren't there, but it is -- because both personal computers and cell phone sales have gotten a tad stronger.

An acquisition is behind the continual outperformance of Linn Energy (LINE), as well, in an otherwise down market for both master limited partnerships and oil-and-gas producers. Linn, long a power in natural gas, is buying Berry Petroleum (BRY), and that deal will soon close, thus allowing analysts to raise numbers very convincingly.

Then there's the miracle of Celgene (CELG), one of the four horsemen of the big pharma apocalypse. This weekend the company revealed some positive data for its blockbuster drug Revlimid for multiple-myeloma, which brings Revlimid still closer to being the first-line drug around the world. That brings the possibility of $17 per share in earnings power perhaps as soon as 2015, which makes Celgene an incredibly cheap stock.

Finally there is the run in the oil refiners. Here's a group that had been down and out not very long ago, as the price of U.S. oil has come up so much that the refiners hadn't been able to arbitrage the difference between cheap West Texas Intermediate crude and expensive Brent. Refiners are able to buy crude, either here or over there, refine it and sell the gasoline at the world price, which is priced off Brent. Now the U.S. glut has brought prices for oil down again for refiners, so they can coin money. This kind of trade is emblematic of a discerning market. The oil stocks are headed down even as the refiners are headed higher -- exactly as it should be.

Rational reasons for stock rallies: This is just what is supposed to happen as we get the transition from a Federal Reserve-assisted stock market to one based on earnings.

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Big institutions have been cutting the stock since even the last earnings report.

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